shutterstock_293482145

Refinancing your home loan to pay for a holiday

How to refinance your mortgage for travel.

Home Loan Tip

While funding a holiday may not be the most traditional motivation to refinance your mortgage, some borrowers consider refinancing at a lower rate to help manage their holiday debt.

If you're planning to take a personal loan to cover the expense of a holiday, one option is to refinance your home loan at a lower rate and use the cost-savings to help cover the cost of a trip. However, this should be carefully considered because failing to plan how you'll repay the holiday debt after it's rolled into your mortgage can increase your interest charges and repayments.

Keep in mind that adding holiday or car debt to your mortgage can put your home at increased risk and it can also harm your refinance application.

Let's look at the below example to understand the risks of refinancing to help manage travel debt.

Dan and Emma’s trip to ThailandRefinancing for holiday travel case study

Dan and Emma have a $400,000 home loan and through their efforts over the last five years, they now owe $360,000. With an interest rate of 5.5%, their repayments are $2,456.35 per month.

Dan and Emma haven't been overseas for years, so they decide to book an extended trip to Thailand for $20,000. With a lack of savings to fund the trip, they're thinking about refinancing with another lender for a 20-year home loan with a lower interest rate of 5.25%. They also consider increasing the loan amount to $390,000 and adding an extra $10,000 to help fund a future renovation.

The new home loan, even with the lower interest rate would increase their monthly repayments to $2,627.99. Due to the total interest charges, this would turn their $20,000 holiday and $10,000 for additional purchases into a combined debt of $48,516.

Dan and Emma decide to speak to a financial planner and a mortgage broker before going ahead with the refinance.

Refinancing the right way

If you're thinking of switching lenders to fund a holiday, make sure you only borrow the amount that you need for the trip. For instance, in the case study above, if Dan and Emma started a repayment schedule and borrowed only the amount they needed for the trip (and didn't get tempted to borrow extra for the renovation), then the refinance could have made financial sense.

If they refinanced to $380,000 at 5.25% for 20 years, this would make their repayments $2,560.61 a month - just over $100 more than their regular repayments.

At 5.25% for 20 years the $20,000 amount would cost $12,344.52 in interest with lower monthly repayments of $134.77.

If Dan and Emma had borrowed the $20,000 at personal loan rates of say 14.5% over five years this would cost them $8,234 in interest, with repayments of $471 a month.

If Dan and Emma added this $471 a month to their loan repayments, this would mean it would take them four years to pay off this amount and would cost them $2,105.05 in interest.

$471 a month is a lot of money, especially if they are already paying a mortgage.

Say they instead added approximately $300 onto their loan per month ($75 a week), this would add only $3,780.04 in interest to the loan and would take the couple a touch under seven years to pay off.

What to watch out for

Keep in mind this example doesn't include the property value of Dan and Emma's home, so the important role equity has in refinancing shouldn't be overlooked.

It's important to note that some lenders will automatically set your new refinanced loan to a new 25 or 30 year loan. If you've paid your loan down then you may want to consider the effect this will have on the overall interest you'll pay.

Watch the video below by Heidi Armstrong of State Custodians Mortgage Company to find out more.

Refinancing home loan options

Rates last updated August 22nd, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000
3.59%
3.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
loans.com.au Essentials - Variable (Owner Occupier, P&I)
3.64%
3.66%
$0
$0 p.a.
80%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2 million from a convenient online lender.
Tic:Toc Live in Loan Variable Rate - Principal & Interest
3.64%
3.65%
$0
$0 p.a.
80%
Low interest rate and limited fees. Add a 100% offset account for $10 a month.
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
ME Flexible Home Loan With Member Package - LVR <=80% $400k up to $699,999 (Owner Occupier, P&I)
3.69%
4.11%
$0
$395 p.a.
80%
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
Virgin Reward Me Variable Home Loan - LVR <= 80% ($500k to $750k Owner Occupier, P&I)
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Frequent Flyer Points with this mortgage to spend on flights and more (subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
ClickLoans The Online Home Loan - LVR <70%
3.70%
3.70%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
Mortgage House Advantage Variable Home Loan COMBO - Owner Occupier 70 (Special)
3.64%
3.79%
$0
$10 monthly ($120 p.a.)
70%
Low rate, low fee loan for owner-occupiers. You will need a 30% deposit to get this mortgage.
Bankwest Complete Home Loan Package Fixed - 2 Year Fixed Rate LVR <90% (Owner Occupier, P&I & $200k+)
3.88%
4.40%
$0
$395 p.a.
90%
Lock in a very competitive 2 year rate and get package discounts on your credit card and offset account.
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150k+ Owner Occupier, P&I) Discount 1
3.72%
4.10%
$0
$395 p.a.
80%
New borrowers or refinancers can get a discounted rate with this package loan. Bonus $1,500 cashback for refinancers.
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier, P&I)
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn thousands of Velocity Frequent Flyer Points on your mortgage (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
ClickLoans The Online Home Loan - LVR <80%
3.84%
3.84%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
Bank Australia Basic Home Loan - Special LVR <80% (Owner Occupier)
3.65%
3.66%
$0
$0 p.a.
80%
This special rate mortgage has no ongoing fees and offers flexible repayments. Save $595 in establishment fees before 30 September.
Bankwest Complete Home Loan Package Fixed - 3 Year Fixed Rate LVR <90% (Owner Occupier, P&I & $200k+)
3.98%
4.41%
$0
$395 p.a.
90%
Take advantage of a low 3 year fixed rate, 40% offset account and no application fee.
Macquarie Bank Basic Home Loan - LVR up to 70% (Owner Occupier, P&I)
3.75%
3.75%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
3.72%
3.74%
$0
$0 p.a.
80%
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
Homestar Finance Variable Rate Home Loan - Owner Occupier ($900 cashback)
3.54%
3.59%
$0
$0 p.a.
80%
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility.
Yellow Brick Road Rate Smasher Home Loan
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
State Custodians Low Rate Home Loan with Offset - LVR up to 80% (Owner Occupier, P&I)
3.68%
3.70%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
CUA Balanced Variable Home Loan - New Lending only (Owner Occupier, P&I)
3.65%
3.66%
$0
$0 p.a.
90%
Competitive interest rate and low fees. Available with a 10% deposit. Partial offset account attached (offset up to $15,000).
Macquarie Bank Offset Home Loan  - LVR ≤ 70% (Owner Occupier, P&I)
3.75%
4.00%
$0
$248 p.a.
70%
Borrowers with a 30% deposit can get this competitive rate.
Mortgage Choice Basic Variable Rate - OO LVR <= 70% ($150k +) P&I Only
3.64%
3.64%
$0
$0 p.a.
70%
A basic variable home loan that offers a competitive interest rate with no application fees and no ongoing fees.
Bankwest Complete Home Loan Package Variable - LVR <=90% (Owner Occupier, P&I)
3.70%
4.13%
$0
$395 p.a.
90%
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
Mortgage Choice Basic Variable Rate - OO LVR <= 80% ($150k +) P&I Only
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
Beyond Bank Low Rate Special Home Loan - LVR ≤ 80% (Owner Occupier)
3.79%
3.79%
$0
$0 p.a.
80%
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
Heritage Bank Discount Variable Home Loan - LVR <=80% (Owner Occupier) New Customers Only
3.67%
3.69%
$0
$0 p.a.
80%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
Macquarie Bank Basic Home Loan - LVR ≤ 80% (Up to $750,000 Owner Occupier, P&I)
3.85%
3.85%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan. Split and redraw facilities included.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
Bank First First Rate Home Loan - LVR < 80%
3.64%
3.69%
$600
$0 p.a.
80%
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
AMP Professional Package Variable Rate Home Loan - $750,000 and above (Owner Occupier, P&I)
3.72%
4.11%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
Mortgage Choice Plus Home Loan - OO LVR <=70% ($150k+) P&I Only
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
Tic:Toc Live in Loan Fixed Rate - 2 Years (Owner Occupier, P&I)
3.74%
3.80%
$0
$0 p.a.
80%
Fast, 100% online application process. Very limited fees. Optional offset account (with fee).
State Custodians Low Rate Home Loan with Offset - LVR 80% to 90% (Investor, P&I)
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
loans.com.au - 2 Year Fixed (Owner Occupier, P&I)
3.89%
3.94%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
Heritage Bank Discount Variable Home Loan - LVR <=90% (Owner Occupier, P&I) New Customers only
3.77%
3.79%
$600
$0 p.a.
90%
Buy your home with just a 10% deposit, few fees and a reasonable interest rate.
State Custodians Low Rate LOC - LVR up to 80% (Owner Occupier, IO)
3.93%
3.94%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
Tic:Toc Live in Fixed Rate Home Loan - 1 Year (Owner Occupier, P&I)
3.64%
3.79%
$0
$0 p.a.
80%
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
ME Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier, P&I)
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
3.69%
4.54%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
UBank UHomeLoan Variable Rate -  Discount Offer for Owner Occupied Variable P&I Rate — borrowing less than $200,000
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule.
ME Basic Home Loan - LVR <=80% (Owner Occupier, P&I)
4.09%
4.11%
$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier, P&I)
3.89%
4.94%
$595
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
Mortgage House Advantage Variable Home Loan - LVR 95 Special (Owner Occupier, P&I)
4.24%
4.27%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier, P&I)
4.14%
4.81%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
3.68%
3.69%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.

Compare up to 4 providers

Image: ShutterStock

Marc Terrano

Marc Terrano is a content marketer manager at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

Was this content helpful to you? No  Yes

Related Posts

Home Loan Offers

Important Information*
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150k+ Owner Occupier, P&I) Discount 1

New borrowers or refinancers can get a discounted rate with this package loan. Bonus $1,500 cashback for refinancers.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy.
Ask a question
Go to site